Advice for the day: Consider Locking Your Clients

Bonds are lower and following through on yesterday's losses as prices are responding negatively to good economic news here and abroad. The recent pricing gains in Mortgage Bonds have been met with a glut of sellers as investors remain jittery over possible Fed tapering after the September 18 FOMC statement. Stocks, which have lost ground 5 of the last six days are catching a bounce and this is weighing on Bonds as well.

Retail Sales for July rose for the 4th straight month by 0.2%, which was in line with estimates. When stripping out autos, sales surged by 0.5%, above the 0.3% expected. In addition, Germany's investor and analyst expectations rose more than expected and the news is helping Global Stocks rebound. The National Federation of Independent Business's (NFIB) small business optimism index edged higher in July, but the gains were historically weak. A growing number of small businesses plan to create new jobs in coming months though the two labor market indicators remained weak. The 3.5% coupon has fallen back below support at the 25-day Moving Average ($100.72).

The next clear support level lies about 78bp beneath current levels - so even though we lost some pricing over the past couple of days, there is potentially a lot more ground to lose. A look at the chart shows the wide 300bp sideways range prices have been in for the past couple of months. With Bonds looking soft and room to fall, it is wise to consider locking.